FTX TOKEN. In the event that legal counsel to the Company advises the Company that it is necessary or advisable for regulatory reasons, Holder shall also be required to deliver, as a condition to exercise, an accredited investor verification letter from a qualified third party verifying that Holder is an "accredited investor" within the meaning of Rule 501 of the Securities Act (as defined above). Be the first to get your hands on a token sale agreement template by registering your interest here. Disclosure: I am not a lawyer, this is not legal advice, and you should seek out independent legal counsel for your unique circumstances. We can only hope that the executive order that Joe Biden signed in early 2022 regulates crypto investing in a way that amplifies rather than destroys its potential. Notwithstanding anything herein to the contrary, even for Tokens that are subject to restrictions on transferability, Holder may exercise the voting and other governance rights linked to the Tokens or deploy them towards staking in accordance with the governance and other rules of the Protocol. WebToken Warrants. For the avoidance of doubt, the Lockup Period and Transfer Restrictions shall not apply to any Tokens received by any Holder as a reward for staking Tokens on the Protocol or any network or protocol pursuant to the proof-of-stake protocol included in the Protocol. The Depending on where the DevLab is incorporated, the following scenarios will unfold:. Investors usually structure these rights in the form of a right of veto on certain decisions of the company or as a list of reserved matters for which the company requires investor consent. Watch this clip from our "Fundraising for Web3 Projects" talk that covers token sale agreements and their use in more detail: If the Web3 founders of the project plan to decentralize its ownership and governance by launching a DAO in the future, it will be important for the investor to understand exactly how the members of the DAO will be selected, and how exactly the governance rights for these DAO members will be structured, as the investor is likely to apply to participate in the DAO themselves. SEC.gov | HOME There are differences between token side letters and token warrants depending on the legalese. Oops! Find him on Twitter at @steveglaveski., This site requires JavaScript to run correctly. This allows investors to receive company shares as well as tokens, and its becoming an increasingly popular way to invest in web3 startups., If you dont plan ahead, you could quickly run into the complication of using separate systems to manage equity and tokens. These Public Warrants will be under lockup for 91 days starting from 29-NOV-2022 to 28-FEB-2023. A SAFT is a security issued for the eventual transfer of tokens from web3 startups to investors. SAFTs & Token Warrants What They Are and How They Work This eradicates the need for the agreement to be validated by a lawyer. have the same signatory, the DevLab company; use the same formula for calculating the portion of investors tokens. This happens either when the Token SPV is registered or some time before the token generation event. To read more about the differences between the token warrant and token side letter, and download a free token side letter template, visit this page.. We'll be glad to chat with you. Rule 2 does not apply when replying to this stickied comment.. Rule 2 does apply throughout the rest of this thread.. What this means: Please keep any "meta" Token Warrants Investors have one alternative that, as of May 2022, is growing in popularity amongst web3 venture funds the token warrant. token SAFTs are often used for seed-stage fundraising in crypto and Web3 projects. Comparatively, the current price is 215.40% higher than the all-time low price. Once the startup founders have gathered their core team and developed their idea into the Proof of Concept stage, they can begin to attract their first investments, hire new people, and start the journey to develop a fully-fledged product. "_ Insider _" means any current or former investors, stockholders, Founders, employees, officers, directors and advisors or other consultants of the Company and any Token Issuer (if other than the Company). The SAFT and SAFTE (simple agreement for future tokens or equity) have largely fallen out of favor in the United States due to legal risk and violations of securities laws. At this stage, founders wont usually have a detailed White Paper with developed tokenomics, or any kind of token distribution plan, although these steps may have been preliminarily mapped out in the startup's Web3 roadmap. WebA SAFT is similar to a simple token warrant agreement for future equity (SAFE), allowing early-stage investors to convert their cash investment into equity later. in Europe or elsewhere), then they have more flexibility in choosing between the token side letter and the token warrant to sign along with SAFE.. To better understand token warrants, lets review them through the lenses of tokenomics and how they relate to another token equity mechanism called a SAFT (Simple Agreement for Future Tokens). Homepage. WebPublic Auction: "03/07/2023 COINS/STOCK CERTIFICATES/RELATED ITEMS" by Jeff Rich Auction Service. The proceeds of the Note may be drawn in a single instance within five (5) business days after the date thereof. Agreement Its not uncommon for the cap table of a web3 startup to include both traditional equity (RSAs, stock options, etc.) Because the token sale agreement is signed at a more mature stage of a Web3 projects development and the investment amounts are quite significant, investors often have questions about obtaining control rights over the company and receiving tokens. And if you plan to give a small amount of tokens to the company, it may be better to use the company allocation methodology (so that investors get fewer tokens for the same amount of capital). One key distinction is that a token warrant represents a right, not an obligation, to purchase future tokens. Therefore, all things considered, the token warrant is better suited for DevLabs incorporated in the U.S.. As for DevLabs registered outside the U.S., such as in Europe, Asia, or Latin America, they have more flexibility in choosing which fundraising document to use, be that the token warrant or the token side letter. But in order for the tokens to maintain a relatively healthy and stable value, their developers must pay attention to tokenomics principles such as supply-and-demand and providing ongoing incentives to holders. This could be done as soon as the Token SPV is incorporated. For example, in the case of Maple, below, a seed investor who owns 10% of Maples equity would receive 2.6% of its tokens (10% x 26%). Thus, if the rules of the DAO will provide for the issuance of governance tokens for its members or the receipt of Liquidity Provider (LP) tokens by existing tokenholders who have staked project tokens, investors will want to reserve the rights to the governance/LP tokens to become DAO members and participate in the future in its governance. Consult with your legal counsel on whether the SAFT or SAFTE is appropriate for your fundraising. 02/16: Freyr Battery, Finnish Minerals Group plan cathode material JV Plain-Vanilla-Warrants (Put) Underlying: FREYR BATTERY: Issuer: Citi: TOKEN SALE AGREEMENT - LIQNET Generally, founders want to raise more capital and dilute less equity/tokens, while the incentive is reversed for investors. If Web3 founders plan to control the emission of tokens and the process of token distribution in a centralized way, and do not plan to launch a DAO to decentralize the governance of their project, then at later stages of investment, investors may start requesting the control rights over the Token SPV. agreement In addition, any such restrictive provisions shall provide that any discretionary waiver or termination of the restrictions of such agreements that are approved by the Company's Board of Directors with respect to any Insider shall apply to Holder, pro rata, based on the number of Tokens held by such parties. Unlike the token warrant, the token side letter doesn't specify token price or dates for token exercise. In case you need help with customizing the template, request a demo of our platform or send us a message in chat.. As the token warrant is signed together with the SAFE, the prices set out in the SAFE includes the value of the token warrant, which is also called a token purchase right. SAFE (Simple Agreement for Future Equity), track both traditional equity and tokens in the same place. 12/ Token warrants are a mechanism for equity holders to exercise the warrant to get tokens. As a condition to each exercise of this Warrant, Holder shall execute a copy of the exercise notice attached hereto as Exhibit 1, confirming and acknowledging that the representations and warranties set forth in Section 6 of this Warrant as they apply to Holder are true and complete as of the date of exercise. WebDuring this most recent bull market in 2021, the spirit of the SAFT has made a comeback in the form of token warrants or token rights agreements, but theyre now typically attached to either a SAFE or an equity investment. 5.1. In such cases, classic corporate equity investment documents are also signed in addition to the token sale agreement, namely, the subscription (share purchase) agreement and the shareholders agreement. It gives both startups and investors optionality. Depending on the business and how it leverages the tokens into the business model, investors will value the equity and tokens accordingly. "_ Deemed __ Liquidation Event " has the meaning set forth for such term in the Company's Amended and Restated Certificate of Incorporation, as amended from time to time (the " Certificate _"). This is possible thanks to the token warrant assignment by the DevLab to the Token SPV at the time it is created or before the token generation event. Any Tokens issued hereunder will be subject to such restrictions on transferability as required by applicable laws and regulations as determined by the Company's Board of Directors and as set forth in Section 3.3 hereto; provided, however, that such restrictions shall be no more stringent than those applicable to Tokens owned by or allocated to any Insider and shall be adjusted, as applicable, to accelerate or otherwise align with any such less stringent restrictions. Their incentive is to get as much of the tokens for the amount of capital invested. The most important of them are as follows: As you can see from this list of key document details, the terms of the token purchase right sit at the very core of the token warrant. These two documents are used in pre-seed Web3 fundraising and share a number of similarities. Holder may update such network address by providing written notice in accordance with Section 7.5; provided, that the Company need not consider such updated network address to be valid until the Company has confirmed receipt of such notice and has approved such updated network address. First: A Digital Warrant Offering A Token company (also referred to as a Token SPV) is a company within a project's legal wrapper that is responsible for the initial token release and distribution. IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the date first written above. You can speak to the team at Legal Nodes to find out more about how we can help you use these documents. If you want your Web3 fundraising to go smoothly and just the way you envision it, Legal Nodes would happily help you customise the template to address your specific fundraising needs.. 1 for the offer, 1 for the agreement outlining equity and token allocations. In exercising its Portion of the Warrant, the undersigned Holder hereby confirms and acknowledges that the representations and warranties set forth in Section 6 of the Warrant as they apply to the undersigned Holder are true and complete in all respects as of the date on which Holder exercises this instrument. In summary, the choice of an investment document for Web3 projects is mostly influenced by the readiness of the tokenomic model. If the tokens have already been issued and the process of their distribution (private/public sale, airdrops, issuance of token options, etc.) You will have: To learn more about tokenomics and how it influences the legal structure of your Web3 project, read more in our dedicated guide on tokenomics. "_ Fully Diluted Percentage _" means, with respect to a Holder, the quotient obtained by dividing (a) the total number of Common Stock then issuable (directly or indirectly) upon the conversion of Preferred Stock of the Company, as if converted, by (b) the total Common Stock of the Company then outstanding (assuming (i) full conversion of all Preferred Stock then outstanding, and treating for this purpose all Common Stock issuable upon exercise of or conversion of outstanding options, warrants or convertible securities, as if exercised or converted and (ii) without duplication, issuance of all shares reserved but unissued under the Company's equity incentive plan(s)). If they are on the stricter side or if there is a high risk of regulatory uncertainty, such as in the U.S., it is probably best to proceed with the token warrant.. If founders have registered the DevLab outside of the US (i.e. Investors mint warrant tokens when they deposit capital into the aggregate pool. Talk to your legal counsel to devise the right strategy for your situation and fundraising needs. Unlike SAFTs, these token warrants typically come in the form of an optional side letter and dont guarantee the deployment of tokens - therefore avoiding the legal complications faced by its predecessor. Free template:Token Warrant Agreements Template and Guide. That being said, it is not the only way to structure the conversion formula, we chose this method as it is an industry practice we think will be most helpful to users of the document, as per our explanation below), So, if your tokenomics is finalised, meaning, the price of the token at the time of its issue and the hard cap is already determined, you will be ready to specify in the token warrant details about the number of tokens available to the investors and their specific price. Certain Public Warrants of AST SpaceMobile, Inc. are subject to a Lock-Up Agreement Ending on 28-FEB-2023. (please print or type complete name of entity) | This checklist provides key information for those outside the legal field but we, of course, strongly advise engaging a lawyer before entering into any binding agreements. Token Warrants Many web3 companies develop their own crypto tokens as part of a blockchain-based project, and these companies can theoretically mint as many tokens as they want. If you plan to allocate a large percentage of the tokens to the company, it may be better to use the conversion rate methodology. A tag already exists with the provided branch name. The token purchase right is the right to buy tokens in the future. That means there's no need for founders or in-house counsel to find lawyers in each jurisdiction where a company may be registered or operating. WebRepresented Deconet in drafting the first blockchain-transferable software license, the Deconet Software License Agreement; Advising the founders of a top 10 token by market capitalization on fund formation and investment matters; Advising a leading entertainment company on all aspects of the development and minting of NFTs require an accommodating regulatory climate for their issuance and distribution, a DevLab may not always be the most suitable vehicle for token issuance. Your submission has been received! See below for an illustrative example where the method used can result in different outcomes for investors depending on the token allocation. Similar to the SAFE, under the SAFT, an investor, upon occurrence of a The idea of that assignment is that the Token SPV then sells the tokens to investors at the price that has already been fixed in the token warrant. WebToken based compensation: $ 570: $ 202: Warrant agreement period, description: INX token warrants are subject to lock-up agreements for periods of 6 to 24 months following the date the Offering was declared effective by the SEC in August 2020. You should consult with a legal specialist such as a lawyer, who is licensed in the country where the documents might apply. Schedule a call and we'll discuss your equity and see how we can help. This, in turn, helps the DevLab (which may be registered in the US as an American company) to avoid any involvement with the process of selling and distributing tokens. The Holder hereby agrees that, without the prior written consent of the Company, the Holder will not: (a) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Locked Tokens, or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Locked Tokens; provided, however, that Holder may stake, vote or otherwise participate in the Network with respect to all of its Locked Tokens. Thank you! Equity term sheets are relatively standard, and today, when funds invest in an early-stage company, they typically use an instrument such as a convertible or a SAFE note (secure agreement for future equity) the latter popularized by Y-Combinator. | This Warrant shall be deemed to have been exercised with respect to Holder immediately prior to the close of business on the date that it is exercised pursuant to the terms of Section 2 above by Holder, and the Person entitled to receive the Tokens issuable upon such exercise shall be treated for all purposes as the holder of record of such Tokens as of the close of business on such date. A token warrant is a derivative that allows the warrant holder to purchase tokens in the issuing company at a specified price on or before a specified expiration date. Any attorney-client relations are between clients and legal providers only. LayerZero Labs issued a letter saying it has come to an agreement with FTX, FTX Ventures and Alameda for a complete equity buyout. To read more about the SAFT, how to use it, and to get a free SAFT template from Legal Nodes, visit this page. view example token side letters with LiquiFi here, Cooopahtroopas and Lauren Stephanians tokenomics analysis, Company allocation or insiders supply method, Simpler, no need to manage the equity stake and the conversion of equity into tokens, More straightforward valuations on just the tokens alone, and not have to mix in the equity value component, Similar to SAFTs, with the added benefit of providing investors the optionality of retaining equity. The tokens are not a replacement for receiving company shares as an investor its complementary and used alongside the traditional equity agreement and cap table. And, as with stock warrants, token warrants are generally issued to investors, banks, and third-party partners (rather than to employees, consultants, and other service providers).. Developed Nations. For example, say 20% of all tokens are allocated to investors. Given the shifting nature of regulation in this space, we recommend consulting with your legal counsel before moving forward with any type of token-based equity..